Mining Cadastre & Licensing

7. Sustainability and financial management

Institutions need to be financially sustainable to succeed. The Mineral Rights Cadastre is the institution responsible for collecting annual rental fees linked to mineral licences and should therefore have the capacity to generate enough income to be economically sustainable.

Practical experience, however, has demonstrated that, in some cases (and sometimes against the legal provisions), the generated economic resources are not received by these agencies, thus creating obstacles to effective mining sector management. While there is no substantial difference, from the viewpoint of organisational efficiency, between locating the Mineral Rights Cadastre as a department inside the ministry or as an agency external to the ministry, this decision may seriously affect the economic sustainability of the institutions. Normally (although these rules may vary from one country to other), budgets for the departments or administrative units located inside the ministry organisation are exclusively dependent on the general state budget and are controlled by the Ministry of Finance. In contrast, an agency external to the organisation of the ministry, created as an autonomous institution empowered with the capacity to manage its own income can provide solutions for the sustainability of management of the whole mining sector. Some countries have successfully adopted this model, although normally, the Ministry of Finance is reluctant to lose control of the income generated by fees derived from mining activity.

The important point here is, although there is no difference between internal and external cadastre agencies solely from an organisational efficiency point of view, the selection of the external option (if compatible with the existing legal framework) may have substantial advantages for the institutional sustainability of the whole mining sector.

Establishing a financially sustainable cadastre in Madagascar

In the late 1990s, the main mining activity in Madagascar was artisanal, with a few small- to medium-scale operations, all of which had a low impact on the national economy. National institutions were not equipped to deal with large-scale mining; the state needed to adapt to the role required in a developed mining sector. The cadastral activity and the methodology followed for granting mineral rights licences were negatively affected by the shortcomings in the legal system. The enacted legal framework allowed the registration of overlapping applications (with the government having the right to later choose the “appropriate” titleholder), and cadastral files and maps were kept secret from the public. As a result, the granting procedures were highly discretionary, the security of tenure was very low, and the investments were very risky. Thus, despite the favourable geology of the country, investments in exploration were very low.

The reform of the mining sector began with the enactment of a new mining law in 1999, followed immediately by implementation of a new cadastre and new licensing rules, on a first-come, first-served basis with a system of progressive annual surface rental fees. Later, the 2005 amendment to the mining law introduced the option to auction available areas with existing information on mineral resources or reserves. The auctioning process was managed by the cadastre office.

The cadastre was created as an external entity, reporting directly to the minister and economically independent from the ministry budget. The Madagascar Mining Cadastre Bureau is a good example of effective organisation, adequate decentralisation, and sustainability. It was created as a decentralised entity, with seven offices (one central office with six regional offices) that were integrated into an autonomous agency (“public company”). Since its creation in 2000, the Madagascar Cadastre, empowered with the capacity to manage its own income, has demonstrated its sustainability by generating enough revenue to hire qualified staff required for the job and to properly develop its cadastral responsibilities. Furthermore, the Madagascar Cadastre demonstrated its functional competence by eliminating cadastral conflicts and with the support of a computerised system, facilitating data management and data exchange between central and regional offices.

The opening of the cadastral files to public consultation and the application of objective and transparent cadastral procedures have increased the security of tenure and the attractiveness for investment. This change is clearly reflected in the increase of the number of cadastral activities (granted licenses per year, see the chart below based on the information sourced from the Madagascar Mining Cadastre Bureau).

Unfortunately, this favourable evolution was thwarted by the "coup d'état" that took place in 2009. Since that year the Madagascar mineral rights cadastre has remained closed to receive applications for new licences. In spite of that, investments still were growing (see the chart below based on the information obtained from the Ministry of Energy and Mines expressed in billions of US$) as consequence of launching in 2008 two world-class mining projects that were not interrupted.

Additionally, the Madagascar Cadastre has demonstrated its sustainability through expansion (three new decentralised offices opened in 2008) and modernisation of its computing equipment with its own financial sources and without external support.

To view more information on mining in Madagascar, including any policy documents, legislation, analysis and publicly available data, see the Extractive Hub’s country information section.